“We are experiencing the first global energy crisis,” said Jason Bordoff, an energy expert at Columbia University, who noted that the crunch has hit almost all of the world’s regions and energy sources. “The ripple effects are being seen globally, and I don’t think we’ve seen the worst of it yet.”
Covid-19 started the world on this road to an energy crisis, whenthe entire world shut down and oil refineries halted production. Unfortunately, when the world was ready to get back to business, crippled supply chains could not get natural gas and oil where it was needed. Add to that a war and the politics of Russian gas stores, and the extreme heat in Europe which is wreaking further havoc, and this is definitely a recipe for disaster.
“It’s just an interconnected global system,”Bordoff said. “When you put pressure in one place, it is felt somewhere else.”
The last crisis of this magnitude was in the 1970’s when OPEC imposed an embargo on oil that affected the entire world. At this time, the International Energy Agency (IEA) encouraged industrialized countries to put some oil in reserve. But not every country was in a condition to do this.
“Today, we have a whole new cast of countries, smaller countries that have been developing rapidly and that have been using more and more energy—and that’s a great sign that reflects their economic development,”Antoine Halff said, an expert at Columbia University’s Center on Global Energy Policy. “But that also made them much more vulnerable to disruption risks, and they’re not part of that safety net of the IEA.”
Countries like South Africa, who are experiencing rolling blackouts, or Ecuador, where deadly protests have been launched against the burgeoning fuel prices, or Ghana and Cameroon, who have experienced shortages and increased fuel prices are often in terrible economic situations and don’t have the means to plan ahead.
“The poorest countries in the world are struggling economically already, are in weak fiscal positions, and are just struggling to afford energy at all,” Bordoff said. “You’re going to see, I think, worse risk of rolling blackouts and trouble keeping the lights on and the electricity going in parts of the world that are lower income and don’t have stable electricity grids to begin with.”
Each country is struggling in its own way to figure out what to do about energy. Some people have turned back to coal, while others are trying to ride out the higher prices.
Advisor to Berkeley Capital Adnan Zai said, “Oil supply has driven foreign the policies of every nation for over a century and history has shown that wars survive on the control of oil supply. The US has allied with every middle eastern oil supplying country for that very reason. Europe on the other hand, has to rely greatly on Russia and as a result it becomes a lot more problematic. The only way to mitigate that is to rely on other sources that are more geo-politically friendly, but it will cost more to do so.”
This crisis has long-reaching effects and is about much more than just gas and oil. When the agricultural products of one area of the globe are suddenly truncated, this can have far-reaching ramifications, and affect the global economy for years to come. Finding other sources of fuel is both painstaking and expensive but will need to be in the forefront of plans as the future plays out.